Business and Tax Updates October 2022: IBBZ Accounting
Summary:
This October month has been colder than usual 2022 is still on track to likely be the fifth warmest year on record in most weather forecast.
In business updates: Phasing out hard-to-recycle and single use plastics from 01 October 2022, The Fair Pay Agreement has become a legislation and RBNZ has lifted the Official Cash Rate to 3.5%.
In tax updates: The bill Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2) has been introduced.
Christmas break is almost upon us, we are working to ensure all tax returns are filed before the end of the year.
Business Updates
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It’s a welcoming news for environment. From 1 October 2022 it became illegal to provide, sell or manufacture the following plastic products in Aotearoa New Zealand.
a. Single use plastic drink stirrers
b. Single use plastic cotton buds
c. Degradable plastics eg oxo and photo degradable
d. Certain PVC food trays and containers
e. Polystyrene takeaway food and beverage packaging
f. Expanded polystyrene food and beverage packaging.
Read More - Fair Pay Agreement has become a legislation.
a. The mandate is - unions initiate the Fair Pay Agreement (FPA) process, by meeting a representation threshold of support from 10% or 1000 workers in coverage, or a public interest test. If the coverage substantially expands during bargaining, the public interest or 10% representation test will need to be retested.
Read More - RBNZ lifted the OCR to 3.5%.
a. The Committee noted recent survey data showed that for businesses, cost pressures and labour scarcity remain the primary concerns. The construction industry faces ongoing capacity constraints. Building consents remain near historic highs, driven by growth in multi-unit dwellings, although there is uncertainty about the construction pipeline going forward.
b. The Committee expects that higher wholesale interest rates will be reflected in higher retail interest rates, particularly deposit rates, as banks compete for funding
c. Household balance sheets are resilient despite recent declines in house prices. Members agreed that falling house prices and declines in other asset prices will negatively impact household consumption.
d. Higher global interest rates and increased risk aversion in global markets have placed downward pressure on the New Zealand dollar. Members believed that this would contribute toward a rebalancing of New Zealand’s current account over the long-term. However, a lower New Zealand dollar, if sustained, poses further upside risk to inflation over the forecast horizon.
Business Updates
The bill Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2) has been introduced. Key highlights of the bill:
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Collecting GST on accommodation and transportation services provided through electronic marketplaces.
a. In 2016, New Zealand’s GST rules were amended to require operators of electronic marketplaces to collect GST on cross-border services purchased by New Zealand resident consumers. This is when companies like Netflix, Google etc started collecting the GST from NZ consumers. The rules for electronic marketplaces were subsequently extended in 2019 to apply to certain imported goods received in New Zealand. This change made overseas operators to register as non-resident service provider and GST base was extended.
b. Short term accommodation provider and ride share providers to be included in the reforms. The Bill proposes to extend the electronic marketplace rules to taxable accommodation and certain transportation services provided in New Zealand from 1 April 2024. The effect of this extension is that operators of electronic marketplaces – whether based offshore or in New Zealand – would need to start collecting GST on these types of services where they are provided through an electronic marketplace. It seems the change would be targeting operators like Air Bnb and ride share companies.
c. A permitted deduction on a flat line rate is proposed. The Bill proposes that operators of electronic marketplaces would be required to take a deduction of the GST payable to Inland Revenue on supplies of accommodation and transportation services that are made through electronic marketplaces by persons who are not registered for GST. This deduction, which is proposed to be 8.5% of the value of the services.
d. Dominant use of assets would enable the GST refund on the purchase of assets. The bill allows GST-registered businesses to elect to treat certain assets that have mainly private or exempt use, such as dwellings, as if they only had private or exempt use. Introduce a simple principal purpose test for assets acquired for $10,000 or less. If these assets are principally acquired for business purposes, the GST registered business would be able to claim a full GST input tax deduction, rather than applying the apportionment rules.
e. Cross-border workers reform, the IRD recognise more and more people are working in cross-border, thus NRCT (non-resident contractor tax rules) to be aligned with time. New changes would simplify approach to the schedular payment withholding thresholds and introduce a 60-day grace period, similar to that proposed for PAYE, FBT, and ESCT. NRCT exemptions would be broadened, including permitting a 92-day retroactive period. Finally, the proposals would allow a non-resident contractor to nominate a New Zealand resident taxpayer to establish a good compliance history for exemption purposes.
f. Perhaps a welcome news for people using public transport. The Bill proposes a fringe benefit tax exemption for public transport. The exemption would cover fares on bus, train, ferry, tram, or cable car services subsidised by an employer mainly for the purpose of their employee travelling between their home and place of work.
IBBZ Updates
IBBZ has been selected as a FINALIST in ‘Excellence in Customer Service Delivery’ at the Westpac Auckland Business Awards 2022 – South and East region. On 31st October some filming is being done at our office. The awards night would be 1st December. We will keep you posted.